New Interchange Rules Give CUs Leg Up on Banks (Misc News: October 3, 2011)
The new pricing structure for debit interchange rates goes into effect this month, but instead of viewing the change as a negative, credit unions should turn it into yet another reason consumers have to choose them over banks, according to MCUL & Affiliates CEO David Adams.
“Credit unions should seize the opportunity to keep their rates and fees low in this environment where big banks continue to raise fees on checking, debit cards and other services,” Adams said. “As the most consumer-friendly alternative, credit unions will continue to bring in more members and help serve more people at a time when affordable essential financial services are more important than ever.”
The Durbin amendment to the Dodd-Frank Consumer Protection and Wall Street Reform Act required the Federal Reserve to set the allowable interchange fees. After a long and bruising battle on Capitol Hill, the Fed set the rate that will average about 24 cents per transaction. While credit unions joined forces with banks to fight the interchange fee caps, the system that is now in place could work to credit unions’ advantage.
The law includes a provision that exempts financial institutions with less than $10 billion in assets. There are only a handful of credit unions in the country with more than $10 billion in assets and none in Michigan.
Bank of America announced that it will charge a $5 monthly fee for using a debit card, starting in 2012. Wells Fargo is testing a $3 fee for using a debit card in some parts of the country. Chase is requiring a $1,500 minimum daily balance in checking accounts, or it will charge customers $12 a month. Other banks are also expected to implement similar charges for basic financial services, many of which remain free at credit unions.
Still, CUNA is concerned that merchants will steer customers away from debit cards from small issuers. When it set the new rates, the Fed also required its staff to report back on the status of debit card payments to small issuers. Credit unions that find evidence of retailers steering consumers away from their higher-cost cards should pass the information on to their league representative. The MCUL will collect the information and pass it along to CUNA.
The MCUL is reaching out to the media to share the credit union story. Click here to read league’s press release.